Mortgage Misery: Repossessions soar by 30 % in a year

Home repossessions have soared by almost a third in a year, according to the latest figures.

About 14,000 property owners were forced to hand over the keys in the first half of this year because they could not pay the mortgage.

That is 18 per cent up on the previous six months and almost 30 per cent higher than the same period last year.

The statistics, from the Council of Mortgage Lenders, show that interest rate rises are taking their tol l on the most overstretched borrowers.

Hundreds of thousands of homeowners have seen their monthly bills soar as the Bank of England has raised its base rate from 4.5 per cent to 5.75 per cent since last summer.

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Mortgage payments are proving a headache for homeowners due to rising interest rates and repossessions are on the increase

Most home owners are able to absorb the increases and cut back spending elsewhere. But for those who are already struggling, rate rises can be the final straw.

Financial experts said most of the people losing their properties were likely to be less well-off borrowers who had used the equity in their homes to raise more money and became swamped with debt.

Pat Boylen, head of personal insolvency at accountancy company PWC, said: "If someone's borrowed against their home to pay off credit-card debt then suddenly they have got a lot of credit cards with no balances on them. Obviously the temptation then is to start spending again."

Repossessions are likely to rise further in the autumn as many cheap mortgages taken out in 2005 come to the end of their fixed-rate period.

In total, about two million fixed-rate mortgages will have to be refinanced at far higher rates over the next two years.

Although repossessions are rising, they are still well below the peak of the early Nineties when 15 per cent interest rates combined with high unemployment and falling house prices left hundreds of thousands of home owners unable to meet mortgage repayments.

The worst year was 1991 when 76,000 homes were repossessed, often leaving borrowers with a legacy of negative equity that took years to pay off.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number is still low by historical standards.

"Interest rates are clearly higher than many were expecting, and are set to remain so."

However, separate government figures showed that the number of people becoming insolvent during the three months to the end of June fell by eight per cent.